Dubai or not Dubai?: A review of foreign investment and acquisition laws in the U.S. and Canada

Vanderbilt Journal of Transnational Law, Nov, 2008 by Chris Lalonde

A. The United States

For many years, the U.S. held a positive view on foreign investment and attempted to implement policies promoting this general belief. The post-9/11 period, however, ushered in a new era of concerns and brought to the forefront a number of issues related to national security. In recent years, the U.S. began to see a number of cases raising national security concerns, and the current regime under CFIUS and Exon-Florio may prove insufficient to address such concerns. The first major case raising such issues involved a potential acquisition by the China National Offshore Oil Corporation (CNOOC) of the U.S. corporation Unocal, which triggered "one of the most politically charged merger battles in U.S. history." (100)

i. CNOOC

By 2005, China sought to increase extensively its assets in the energy market to meet an ever-increasing demand, and, as part of its policy, China made an unsolicited $18.5 billion offer for the U.S. energy company Unocal. (101) CNOOC is one of China's largest oil producers but, more importantly, seventy percent of the firm is owned by a state-controlled company. (102) CNOOC's bid topped that of the nearest competitor, the U.S.-owned Chevron Corporation, by $2 billion. (103) Despite assurances from the Chinese foreign minister that the proposed acquisition represented merely "normal commercial activity between enterprises" and was being done because it "makes sound business sense for our company," the proposal set off a number of alarms in the U.S. (104)

Shortly after the bid was announced, the matter became a hot topic of concern in Congress. CNOOC attempted to assuage those concerns by making a number of concessions. (105) CNOOC agreed to continue selling most of the U.S.-produced oil and gas to U.S. customers, to retain almost all of Unocal's employees, and to attempt to retain as much of the current management as possible following the acquisition. (106) Further, CNOOC also agreed to make a voluntary filing with CFIUS for review and approval of the transaction. (107)

Congress quickly responded to the conciliation attempts by CNOOC but remained largely undeterred from its previous stance of skepticism toward the transaction. (108) During the summer of 2005, Congress passed several measures expressing opposition to the deal and requested that the President conduct a thorough investigation of the proposition. House Resolution 344, one of the most prominent of these bills--passed by a wide margin of 398 to 15--expressed the concern that the transaction potentially impaired the national security of the United States and called for the President to review the deal immediately upon its execution. (109) In addition, the passage of House Amendment 431 on the same day cut off funding to CFIUS by prohibiting the Treasury Department from making any expenditures involved in approving the deal. (110) The Senate also made attempts to have its voice heard on the transaction by including a proposed joint resolution that would prohibit the transaction from proceeding outright. (111)